Delivering a midyear economic report to Capitol Hill, Bernanke struck a somewhat cautious tone. He suggested the economy appears likely to expand "at a moderate pace" over the second half.

Still, the Fed chief told the House Financial Services Committee that growth this year will be a bit slower than the Fed projected in February.

Growth should strengthen a bit next year, he said. The inflation forecast, however, wasn't changed. It calls for prices other than food and energy to edge lower.

Against this backdrop, the Fed is likely to leave interest rates where they are through the rest of this year.

For just over a year, the Federal Reserve has held a key interest rate at 5.25 percent, providing a period of stability to borrowers.

Bernanke took pains Wednesday to hedge the Fed's bets and outline risks to the economy.

One risk is that energy and commodity prices could continue to rise sharply, boosting the prices of lots of other goods and services and thus spreading inflation through the economy.

The Fed "has consistently stated that upside risks to inflation are its predominant" concern, Bernanke said.

Overall consumer prices calmed down in June, the government reported Wednesday. They rose by just 0.2 percent - the smallest increase in five months. Gasoline prices, however, are now hovering past $3 a gallon.